Annuity vs. Lump Sum Lottery Winnings: 3 Factors to Consider

lump sum lottery winningsSo, you’ve won big and now you’re trying to decide how you want to receive lottery winnings. Maybe you haven’t won yet, but you enjoy the thought exercise of fantasizing about it. Playing the lotto is believed to be the most popular form of gambling in the U.S. Regardless, the biggest decision you’ll have to make (if you win) is whether you wish to receive annuity payouts, or lump sum lottery winnings. There are benefits and disadvantages to both. In the end the decision is highly personal, but here are three factors to think about that will influence your choice.

1.) Financial Standing: Most likely this will be the biggest deciding factor. If you’re fortunate enough to be in solid financial standing before, taking the lump sum lottery winnings may not be your best option. Unfortunately, as a nation American individuals owe almost $12 trillion in debt. Between school loans, car payments, and house mortgages the average household in the U.S. is almost $90,000 in debt. If you’re in desperate need of paying off debt, lump sum lottery winnings might be for you. This way you can take the money and immediately improve your situation. This is especially important as it will save you money in interest in the long run.

2.) Personal Management: Even if you’re in great financial standing you still may be tempted to take lump sum lottery winnings. This could be to your advantage if you are savvy with your money. Having that much extra cash means you can invest a great deal in a variety of ways. Stocks, bonds, and hard commodities like gold and silver are the top examples. There are a million different ways to invest millions of dollars. Don’t be afraid to enlist the help of a financial adviser though. Even if you have the skills yourself, coming into a lot of money can make people irrational. Keep in mind there’s always the risk of loss in investing. A lottery annuity can be a great way to set yourself up for a safe, consistent annual income.

3.) Other Implications: Taxes, legalities, and personal issues are just some of the other reasons to factor into your decision. A looming medical expense could be one reason to receive lump sum lottery winnings. Or even the notion that family and friends will come calling with their hands out if they hear you won millions of dollars. If you only receive a portion yearly, it might be easier to say no to those you love.

There’s really no universally right or wrong answer in the choice you make. Your personal situation will determine what’s best for you, but in the end only you can make that call. If you have faith and believe that you will be wise with one huge check, go for the lump sum. But if you prefer a safer, more conservative approach the annuity route is probably for you.

5 Tips Before You Collect Lottery Winnings

lottery winnings

Playing the lottery is the most popular and prevalent form of gambling in the U.S. according to multiple surveys. Naturally, getting cash for lottery winnings is probably the first thing most people that win a lotto will think about. If you’re ever fortunate enough to be in this situation, by all means take a second and let your mind wander. Chances are it will change the rest of your life from that point on. After you’ve taken the time to relish the moment, though, here are the first five things you should plan/do before you receive lottery winnings.

1.) John Hancock: Even before you allow yourself to ponder the vast amounts of money you’re about to come into, you should sign the winning lottery ticket. In fact, it’s probably not a bad idea to take a video of yourself doing so. This will help ensure the security and ownership of the ticket. If you don’t properly verify that it’s yours, you may have trouble collecting lottery winnings.
2.) Get Help: Depending on the winning amount and your financial standing prior, your life is about to change drastically. Don’t go at it alone. This can be tricky because you don’t want to involve more people than necessary, but you will need some assistance. A financial adviser and/or a lawyer to help you through the legal, financial, and technical aspects is a must. Family assistance is also great. Just be sure of your relationship with them, and keep in mind money can do crazy things to people. Even if they’re your own blood.

3.) Payout Option: This is the biggest decision that will directly affect your immediate future. Choosing annuity, or lump sum lottery winnings will depend on a variety of personal factors. The average person in the U.S. is $3,761 in credit card and lender debt. You may be able to pay off the majority of your debts without having to select the lump sum. This will be important to discuss with the professional help you should have already enlisted.

4.) Find Peace: This may sound like some metaphysical hub-bub, but it might be the most important piece of advice. Things are going to change quickly for you. Ground yourself in who you are as a person. Over 40% of American households regularly spend more than they generate in income. Don’t fall into the trap. Allow your new-found wealth to enhance your life, not define it.

5.) First Purchase: Okay, now time for the fun part. Take some time to decide what your first real purchase will be. It doesn’t need to be anything extravagant either. Something small that you’ve wanted for a long time could be the perfect selection as a reminder of where you came from.

Coming into a large sum of money can be as stressful as it is exciting. Follow these tips to keep one of the happiest moments of your life from turning sour.

Life Ain’t Cheap — 9 Average Prices of Life’s Necessities

biggest purchasesLiving isn’t cheap. Just about everything in life comes with a price tag, and it’s usually pretty expensive. Here are the average prices of some of life’s necessities.

  1. Raising a Child – The cost of raising a child born in 2013 to the age of 18 is about $245,000 on average. Even scarier, it’s only going up, and that doesn’t include the cost of college tuition, either.
  2. Buying a House – In the United States, the median home value is about $179,200. Although real estate prices fluctuate and vary across the nation, the average price of a home is now nearly one-fifth of a million bucks.
  3. Buying a New Car – Pre-owned vehicles might be cheaper, but you get what you pay for, and ultimately wind up having to put a ton of money into them for repairs and maintenance. Buying a new car is just easier, and more reliable, but also pretty expensive. The average cost of buying a new car in 2015 is $33,560.
  4. Getting Married – The day of your marriage is the single happiest day you’ll ever have, but it doesn’t come cheap. In 2014, the cost of an average wedding was a staggering $31,213.
  5. Starting a Business – Starting a business might be part of the American Dream, but it’s far from being cheap. The average of cost to fund a new business is about $30,000.
  6. Furnishing a Home. – You can’t leave your house bare and empty, though the cost of furnishing a home might make that a tempting idea, since it costs about $17,920.
  7. Buying a Used Car – The average cost of a used car is about $16,800, and that’s not including all those inevitable repair costs. Plus, the average value of a one- to three-year-old used vehicle has risen 16% per year since 2008.
  8. Cost of Having a Baby – Becoming a parent is a life goal for many people. Unfortunately, it costs about $9,700 to have a baby when you factor in the doctor’s fees and hospital charges. If a C-section is required, the cost rises to a whopping $12,500.
  9. Engagement Ring – If you love it, then you should put a ring on it. Just be ready to cough up $5,885 if you do.

What’s the biggest purchase you think you’ll make in your lifetime? Share in the comments!

3 Great Reasons to Sell Your Structured Settlement

sell your structured settlement

While the economy is on a slight uptick, many people are still low on capital and need every penny they can scrape up to get by. Sometimes, waiting on the payments from a structured settlement can leave you anxious and devoid of the funds you need to live the life you’ve always wanted.

If you’re looking to sell your structured settlement, you should understand how beneficial it could be for both your present and future financial endeavors. Here are three things to keep in mind when you’re considering selling a structured settlement:

1. Earn tuition money to go back to school.
Everybody knows that the cost of education is astronomical, and making small tuition payments will end up costing you added interest in the long run. Outstanding student loan debt has reached a whopping $1.3 trillion, and it’s important to pay off your tuition debts as soon as possible to avoid being just another statistic. Selling your annuity or structured settlement will give you the ability to get an education without the stress of student loans hanging over your head.

2. Purchase a home or start a business.
An important reason you may decide to sell your structured settlement is to have the funds necessary to buy a house or start a business. Mortgage lenders can require a down payment of up to 20% of the sale price, and many people receiving structured settlements simply don’t receive large enough payments to meet these requirements. Businesses can be even more expensive, as the Kauffmann Foundation estimates that it costs a minimum of $30,000 to really get a company off of the ground.

3. Eliminate debt.
Getting cash for structured settlements is also the quickest and easiest way to eliminate any debt you have, whether it be through credit cards or medical debt. About 35% of Americans said they had trouble paying off all of their bills and medical debt in 2014. When you sell your structured settlement, you get the cash you need to erase these debts that can haunt you for the rest of your life.

Don’t wait to find out if selling your structured settlement is the best option for you. The longer you wait, the longer it will take for you to erase your debt and start a new, fulfilling life.

How To Handle Your Finances After Selling Your Annuity

selling your annuity

Deciding to sell your structured settlement or annuity settlement is a pretty big decision to make. If you’ve already decided to sell your annuity and you’ve begun the process, you’ve probably already done quite a bit of research about your options and you know that it’s the best choice in the long run.

But what you may not feel prepared for is how to proceed after selling an annuity settlement — what’s the best thing to do with this sudden influx of cash you now have?

Maybe you’re hoping to pay off some debt (the average American owes about $3,761 to credit lenders at any given time) or go back to school (a private university costs about $31,231 annually in tuition), or maybe you want to make a big purchase for a new house (which will probably cost at least $272,900).

Regardless of how exactly you’re hoping to spend your money, there are a few things you can do to protect your financial stability after selling your annuity:

  • Talk to a financial adviser
    This is one of the best ways to protect yourself and lessen the risk of ending up in debt. When you have a good financial adviser on your side, you’ll be more capable of organizing your finances, paying off debts, and investing your money wisely.
  • Remember to report your taxes after selling your annuity
    This is a really important point and it’s essential that you don’t overlook your taxes now. Everyone has to pay taxes on lump sums, annuity settlements, and even lottery winnings; you probably won’t have to pay any fines for selling your annuity, but remember that your taxes will be looking a little funky next year.
  • Adjust your investments as needed
    Maybe you haven’t really made any big investments and you don’t intend to — and that’s perfectly fine. But if you have already made investments, it might be a good time to look at whether you’re financially stable enough to make a bigger investment with your annuity money.

Now we want to hear what you think — if you’ve sold an annuity or structured settlement before, how did you manage your finances afterward? If you’re thinking about selling your annuity in the near future, what concerns or questions do you have?

The Top Do’s and Don’t’s of Managing Your Lottery Payments

lottery paymentsWinning the lottery is a pretty exciting thing, and it can really be a life-changing event — but it’s up to you to make sure that if you do win the lottery, you make smart choices with your lottery payments. Here’s a quick starter guide to a few do’s and don’t’s when you win it big:

Do: Consider your lottery payment options carefully.
Lottery winnings can be taken in the form of one lump sum or in lottery annuity payments, which function much like a traditional annuity agreement and pay out over a long time (usually over a period of about 25 years).

Don’t: Take the lump sum settlement just because you want to spend it without thinking.
If you’re interested in investing your winnings, you’ve been waiting to purchase a new house, or you’ve been wanting to pay off debts, then taking the lump sum might be the best option. But if you don’t have a plan for your lottery winnings first, you might be more likely to overspend without realizing it. In fact, it’s estimated that 40% of all American households overspend each year, and the average American owes about $3,761 in revolving credit — so it’s pretty easy to keep spending even after your winnings have started petering out.

Do: Have a plan for what you’d like to do with your money.
It might even be a good idea to ask a financial adviser for help! If you know how you want to spend your money, then you’ll be less likely to spend it all on things you don’t really need or want. Keep in mind that the best option might be to invest it!

Don’t: Assume that the amount you win will be the amount you take home.
You’re going to be paying interest on your lottery winnings — a lot of interest, especially if you choose to take a lottery lump sum payout. All lottery payments are taxed pretty heavily, so you’re probably going to receive about half of the amount that you’ve won.

Do: Remember that you can sell your lottery payments if you chose an annuity but want to receive a lump sum of cash.
Maybe you chose the annuity settlement because of interest rates, because you thought it would be easier to manage your finances, or because it just seemed like the best option at the time. Regardless of why you chose annuity lottery payments, it’s possible to sell these payments if you’ve decided that you need to have the cash up front ASAP. Early withdrawal fees on an annuity just aren’t worth it!

If you’ve won the lottery before, what advice would you give to someone else? Let us know down in the comments section!